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Is the US-EU Open Sky Agreement “open” to low cost airlines?

Norwegian Air Files for  Foreign Air Carrier Permit Based on Open Skies Agreement

In December 2013, Norwegian Air International Ltd. («Norwegian»), an Irish subsidiary of Norwegian Air Shuttle ASA, Europe’s third largest low cost airline, filed an application to the U.S. Department of Transportation («DOT») in order to obtain a foreign air carrier permit. The permit would allow the Irish subsidiary to operate flights between the U.S. and EU member states and other members of the European Common Aviation Area.

The legal basis for Norwegian’s application was the Air Transport Agreement between the U.S. and the member states of the EU signed 25/30 April 2007 (as amended 24 June 2010), often referred to as the US-EU Open Skies Agreement («the Open Skies Agreement»). The initial treaty was revolutionary in the sense that all European airlines were given the opportunity to fly between any point in the EU and any point in the U.S., without facing any restrictions as to pricing or capacity. Norway and Iceland, being non EU-members, acceded to the Open Skies Agreement on 21 June 2011.

Norwegian Meets with Resistance for its Request

With the Open Skies Agreement in hand, one might have thought it would be easy for Norwegian to obtain its foreign air carrier permit. However, as evident from the massive media coverage during the last years, Norwegian was met with powerful resistance from labor unions and other lobbyists in the U.S. The critics pointed towards Norwegian’s business model and accused Norwegian of social dumping by using crew members from low cost countries. In addition Norwegian was criticized for its Irish fleet as a “flag of convenience” only to avoid internationally recognized labor rights.

Obviously, these serious allegations were not entirely irrelevant for Norwegian’s application. From a legal perspective it is worth mentioning Article 17, which states the importance of the social dimension of the Open Skies Agreement, hereunder that the Open Skies Agreement is not intended to undermine labor standards or labor-related rights and principles contained in the parties’ respective laws. Further Article 4 states that the applicant has to be qualified to meet the conditions prescribed under the laws and regulations normally applied to the operation of international air transportation by the party considering the application, which in this case was DOT.

DOT Finally Grants Norwegian Airlines Foreign Carrier Permit

And apparently, DOT seems to have looked thoroughly into the allegations against Norwegian. That is, it remained undecided for some two and a half years until 15 April 2016, when DOT tentatively found that Norwegian was to be granted the permit and that Article 17 would not be infringed.

Several parties filed responsive pleadings to DOT’s tentative decision, both in support and in opposition. In spite of the critics’ referral to the social aspect of the Open Skies Agreement and Norwegian’s business model, DOT decided on 30 November 2016 to make their tentative decision final and granted Norwegian its foreign air carrier permit. The DOT made reference to “the totality of the record regarding [Norwegian’s] application, including those changes to its hiring and employment practices that it has offered as a direct result of the difficult issues that have been raised during the course of this proceeding”.

Not without political pressure though, only a few days prior to the final decision the European Commission announced arbitration against DOT under the Open Skies Agreement. And only a few days after, one of the unions announced a suit against DOT to revoke the permit.

Look for Norwegian Air to begin US Operations

Following the issuing of the permit Norwegian has expanded its focus on the U.S. with the launch of several new transatlantic routes, opening up the transatlantic skies to Americans as well as Europeans with low fares (thanks to its low cost policy). It remains to be seen whether other European low cost airlines planning to operate to or from the U.S., not to mention Norwegian Air Shuttle’s UK subsidiary, will face the same difficulties obtaining a permit under the Open Skies Agreement. Hopefully the Open Skies Agreement is now “open” to other low cost airlines without similar filibuster proceedings, assuming they can evidence compliance with the labor standards expected in the U.S and Europe.

By Alexander W. Barg and Kyrre W. Kielland

ADVOKATFIRMA RÆDER DA is a Norwegian law firm with international focus and some 65 lawyers covering all areas of commercial law. Ræder’s aviation team consists of five experienced lawyers and regularly assists national and international players within the aviation industry, such as airlines and other lessors/lessees, airports, banks and financing institutions and insurance companies. Ræder’s aviation team typically advices on financing and other transactions, tax and corporate issues, leasing agreements, sale/purchase of aircrafts, registration and deregistration of aircrafts, as well as regulatory issues, dispute resolution, recourse claims and insurance-related issues.
Ræder’s lawyers are renowned for their responsive and commercial approach, and its aviation team benefits from its experience with other transport industries, e.g. shipping.